GIFT   OF 


A  Substitute  for  the  Aldrich  Plan 

SEPARATE    RESERVE 
ASSOCIATIONS 


Preventive  of  Financial  Panics 

and 
Suitable   to  American  Conditions 


BY 
J.   HOWARD  COWPERTHWAIT 

Author  of 

Money,  Silver  and  Finance 
(1892-1896) 


The  Trade  Supplied  by 

THE  AMERICAN  NEWS  COMPANY 
Price  25  Cents 


SEPARATE    RESERVE 
ASSOCIATIONS 


Preventive  of  Financial  Panics 

and 
Suitable   to  American  Conditions 


BY 

J.   HOWARD  COWPERTHWAIT 

Author  of 

Money,  Silver  and  Finance 
(1892-1896) 


The  Trade  Supplied  by 

THE  AMERICAN  NEWS  COMPANY 
Price  25  Cents 


COPYRIGHT,  1911 

BY 
J.  HOWARD  COWPERTHWAIT 


SEPARATE  RESERVE  ASSOCIATIONS. 

No  statement  of  the  financial  problem  would  be  com- 
plete without  specifications  of  our  lack  of  a  supply  of 
new  money  and  new  credit  in  time  of  need,  and  also 
our  lack  of  an  open  discount  market  for  financial  and 
commercial  paper  at  all  times.  And  any  good  plan  of 
financial  reform  must  give  due  consideration  to  the  need 
for  establishing  an  open  and  broad  discount  market  as 
well  as  to  the  building  and  filling  of  reservoirs  of  new 
money  and  new  credit.  In  England,  the  discount  mar- 
ket works  so  well  in  connection  with  the  Bank  of  Eng- 
land that  the  reservoir  of  new  money  has  not  been 
tapped  in  half  a  century;  and,  to-day,  the  volume  of 
paper  money  m  England  remains  as  fixed  by  the  Act  of 
1844,  that  is  at  less  than  the  equivalent  of  $100,000,000, 
excepting  only  such  paper  money  as  has  the  nature  of 
gold  certificates,  the  growth  of  British  trade  and  in- 
dustry having  had  to  depend  upon  the  importations  of 
gold  and  upon  the  development  of  credit.  And  as  it 
can  not  be  disputed  that  the  development  of  credit  pro- 
ceeds most  generously  in  an  open  discount  market 
where  endorsed  notes  and  accepted  drafts  are  sold  and 
resold  over  and  over  again,  it  should  be  worth  our 
while  to  ascertain  why  we  have  no  such  market  in  this 
country.  It  may  not  be  out  of  place  to  add  that  interest 
rates  usually  are  lower  in  England  than  in  America  in 
spite  of  our  superabundant  issues  of  paper  money  and 
our  almost  twice  as  great  circulation  of  money  per 
capita. 


240983 


SEPARATE  RESERVE  ASSOCIATIONS 


There  is  a  fundamental  difference  between  American 
and  foreign  business  customs,  including  English,  and 
this  difference  gives  a  different  character  to  the  com- 
mercial paper  created  on  the  opposite  sides  of  the  At- 
lantic. Abroad,  merchants  buy  goods  on  credit  and 
give  an  acceptance  on  time-drafts,  to  cover  the  bill  of 
sale^  or  get  bankers  to  accept  for  them,  thus  creating 
"prime  bills"  of  exchange.  These  bills,  originating  in 
certain  mercantile  transactions,  with  two  names  on 
them,  the  drawer  and  the  acceptor  and  sometimes  get- 
ting many  names,  are  considered  suitable  for  the  invest- 
ment of  any  idle  funds,  and  when  approaching  maturity 
these  bills  become  very  choice  for  temporary  invest- 
ments. The  discount  market  is  so  broad  that  nobody 
in  buying  such  bills  need  fear  that  he  may  not  be  able 
to  sell  them  should  he,  himself,  be  in  need  of  funds  be- 
fore the  bills  mature.  Here,  on  the  contrary,  the  gen- 
eral custom  with  exceptions  in  a  few  lines  or  in  country 
districts  is  to  buy  goods  for  cash,  less  a  cash  discount. 
The  buyer  provides  himself  with  the  necessary  funds 
by  selling  his  note  through  a  broker  or  by  getting  his 
own  bank  to  discount  it;  the  note,  in  either  case,  being 
more  suitable  for  its  new  owner  to  hold  until  its  matur- 
ity than  to  resell,  for  to  attempt  to  resell  the  note  is 
possibly  to  excite  suspicion  of  its  value,  or,  maybe,  to 
excite  distrust  of  the  strength  of  the  bank  which  tries 
to  resell.  When  banks  resell  paper,  the  transactions, 
as  a  rule,  are  in  small  circles  among  institutions  habitu- 
ally working  together.  It  will  be  noticed,  too,  that 
while  American  commercial  paper  is  supposed  to  arise 
from  the  need  of  manufacturers  and  merchants  to  ob- 


SEPARATE  RESERVE  ASSOCIATIONS 


tain  funds  to  pay  for  merchandise,  yet  each  piece  of 
paper  has  not  on  its  face  the  evidence  of  such  use  of 
the  funds.  Our  kind  of  paper,  when  made  in  Europe, 
is  avoided  by  bankers  because  of  its  possible  financial 
character,  as  distinct  from  the  desirable  commercial 
character.  But  however  advantageous  to  the  further  de- 
velopment of  American  industry  and  commerce,  might 
be  the  changing  of  the  quality  of  our  paper  so  as  to 
give  it  a  better  chance  to  become  easily  salable  and  re- 
salable,  it  must  be  admitted  that  American  business 
methods  are  not  at  all  likely  to  be  changed  and  there- 
fore that  American  paper  will  continue  to  be  drawn 
somewhat  as  at  present.  The  cash  discount  which  a 
buyer  deducts,  in  paying  for  goods,  is  generally  twice 
as  great  as  his  loss  of  interest  upon  his  own  note,  which 
he  sells, or  puts  through  his  own  bank,  and  so  the  buyer 
will  continue  to  pay  cash.  On  the  other  hand,  sellers 
who  are  in  the  habit  of  getting  cash  for  their  goods,  less 
a  cash  discount,  neither  could  nor  would  insist  upon 
being  given  notes  or  acceptances  instead  of  cash.  We 
must  therefore  consider  the  possibility  of  the  develop- 
ment of  an  open  discount  market  for  paper,  any  piece  of 
which  may  or  may  not  have  arisen  directly  from  a  com- 
mercial transaction;  and,  certainly  the  prospect  is  not 
bright  and  may  be  spoiled  by  mistakes.  Senator  Aldrich 
proposes  to  confer  upon  national  banks  the  right  to 
accept  time-drafts  arising  from  commercial  trans- 
actions, but  as  neither  drafts  nor  notes  arise  in  great 
volume  directly  from  commercial  transactions,  it  would 
seem  to  be  better  to  say  directly  or  indirectly,  allowing 
both  qualities  of  paper,  or  better  still  to  limit  the  total 


SEPARATE  RESERVE  ASSOCIATIONS 


sum  to  be  risked  by  any  bank,  in  any  one  direction,  and, 
say  nothing  about  the  quality  of  the  paper  to  be  ac- 
cepted or  to  be  endorsed.  In  England,  there  is  little 
or  no  restriction  upon  bank  action  in  such  a  matter  as 
this,  and  I  think  that  in  the  future  we  will  control  banks 
less  by  law  and  more  by  public  opinion,  exercised 
through  clearing  house  associations  or  reserve  associa- 
tions. Of  course,  however,  we  are  not  going  to  lose 
sight  of  the  fact  that  banks  use  the  money  which  belongs 
to  their  depositors  and,  therefore,  that  there  must  be 
some  adequate  supervision. 

It  is  not  easy  to  over-estimate  the  importance  of  in- 
ducing the  general  lodgment  of  idle  funds  in  commercial 
paper  instead  of  in  call  loans.  At  present  so  much 
money  often  is  put  out  on  call  that  the  rate  of  interest 
falls  to  two  per  cent  per  annum ;  while,  at  other  times, 
there  is  so  little  money  for  loaning  in  this  way  that  the 
rate  may  soar  to  one-half  of  one  per  cent,  per  day. 
Abroad,  the  same  sort  of  funds  is  put  into  commercial 
paper  to  a  very  great  extent  because  the  paper  can  be 
resold  whenever  it  is  advisable  to  resell,  the  broad  dis- 
count market  thus  serving  the  purpose  of  our  call-loan 
market.  The  rate  of  interest  does  not  change  suddenly 
in  Europe,  the  reason  being  that  a  slight  advance  oper- 
ates at  once  as  a  check  upon  the  production  of  commer- 
cial paper,  merchants  everywhere  watching  for  changes 
in  the  bank  rate  and  varying  their  own  activities  accord- 
ingly. Here,  on  the  contrary,  an  advance  in  the  call- 
money  rate  merely  excites  curiosity  as  to  what  Wall 
Street  is  doing,  merchants  continuing  to  buy  goods 
about  as  usual  and  relying  upon  their  banks  or  their 


SEPARATE  RESERVE  ASSOCIATIONS 


note  brokers  to  find  the  necessary  funds.  These  are 
forthcoming  until  there  is  a  very  general  scarcity  and 
then  comes  a  crash.  The  difference  of  vital  importance 
is  the  foreign  gradual  hardening  of  money  rates  as  com- 
pared with  American  sudden  hardening  of  money  rates. 
In  Europe,  the  open  discount  market  and  the  central 
banking  institution  are  in  close  touch  at  all  times  and 
neither  could  exist  well  without  the  other.  The  great 
market  absorbs  the  bulk  of  the  commercial  paper  and 
prevents  an  avalanche  of  it  from  reaching  the  central 
bank.  The  central  bank  standing  always  ready  to  re- 
discount paper  or  to  loan  money  upon  securities,  the 
amount  of  money  which  it  would  furnish  being  practi- 
cally unlimited,  gives  stability  to  the  discount  market 
by  its  assurance  against  any  sudi  mal-adjustment  of  the 
money-supply  to  the  money-demand  as  we  know  under 
the  name  of  "currency  famine"  which,  of  course,  is  a 
misnomer,  the  more  suitable  term  being,  say,  currency 
voraciousness,  since  it  is  the  appetite  for  currency  which 
increases  and  not  the  quantity  of  currency  which  de- 
creases. But  although  a  comparison  of  European  with 
American  financial  conditions  indicates  that  we  need  a 
central  bank  as  well  as  a  discount  market  yet  a  study 
of  American  ways  and  American  financial  history  shows 
that  we  can  not  have  any  such  bank.  American  politics 
destroyed  the  first  Bank  of  the  United  States  in  1811, 
and  the  second  in  1836.  Several  years  ago  a  very  im- 
portant commercial  body  sent  an  investigating  commit- 
tee abroad  and  this  committee  reported  in  favor  of  a 
third  experiment,  the  establishing  of  a  central  bank, 
and  then  the  parent  body  adopted  its  committee's  re- 


SEPARATE  RESERVE  ASSOCIATIONS 


port ;  but,  so  far  as  I  know,  not  a  single  statesman  of  any 
prominence  has  been  so  lacking  in  the  instinct  for  his 
own  political  preservation  as  to  attempt  seriously  to 
create  public  sentiment  in  favor  of  the  centralization  of 
banking  power  and  influence,  at  least  under  the  name  of 
bank.  The  Aldrich  Plan  is  for  a  national  reserve  associ- 
ation with  branches,  and  it  remains  to  be  seen  whether 
this  is  too  much  like  a  central  bank  to  find  favor  in  the 
present  period  of  general  decentralization  and  of  nation- 
wide destruction  of  the  ties  which  bind  together  the 
component  parts  of  trusts  and  amalgamations.  From 
the  political  standpoint  it  would  seem  to  be  much  easier 
to  get  congressional  favor  for  the  establishing  of  many 
reserve  associations  than  for  the  establishing  of  one 
great  association  with  many  branches.  Still  I  do  not 
wish  to  be  understood  as  joining  with  those  who  claim 
that  the  Aldrich  Plan  was  drawn  to  suit  what  is,  fairly 
or  unfairly,  called  "The  Interests"  or  "The  Money 
Trust."  I  attribute  to  the  great  senator,  as  well  as  to 
his  followers,  the  most  patriotic  motives;  but  neverthe- 
less, I  should  say  that  no  more  inopportune  period  could 
have  been  chosen  for  offering  to  the  public  any  creation, 
however  able  and  ingenious,  which  bears  the  name  of 
the  champion  mixer  of  politics  with  tariff  schedules.  It 
is  inevitable  that  a  mixture  of  politics  and  finance  should 
be  looked  for. 

The  development  of  open  discount  markets  and  with 
them  of  the  principles  of  central  banking  would  pro- 
ceed more  naturally  and  certainly,  in  our  country  of 
vast  and  varied  interests,  if  there  were  established 
many  reserve  associations,  than  if  there  was  established 

8 


SEPARATE  RESERVE  ASSOCIATIONS 


only  one  with  many  branches,  at  least  the  matter  so  pre- 
sents itself  to  me.  People  are  not  going  to  buy  and 
sell  paper  with  the  greatest  possible  freedom  unless 
there  is  perfect  assurance  of  the  smooth  working  of  all 
the  financial  machinery,  operating  under  the  central 
banking  idea.  There  must  not  be  any  fear  of  hitch  or 
delay.  Senator  Aldrich  names  Washington  as  the 
headquarters  of  a  central  reserve  system  and  at  once 
we  have  difficulty,  for  New  York  is  the  financial  centre 
of  the  country,  and  banks  and  bankers,  all  over  the  land 
would  continue  to  keep  balances  in  New  York  without 
regard  to  any  new  scheme.  Therefore,  when  a  danger- 
ous situation  should  appear,  either  the  managers  of  the 
Xew  York  branch  would  act  quickly  and  without  re- 
gard for  the  Washington  headquarters  or  would  waste 
valuable  time  in  explaining  matters  to  Washington  of- 
ficials and  getting  their  advice  although  these  officials 
would  not  necessarily  be  in  such  intimate  touch  with 
financial  affairs  as  to  know  what  advice  to  give.  I 
should  think  that  the  most  important  assistance  in  cen- 
tral banking  which  might  be  given  by  such  head  officials 
as  should  be  located  in  Washington,  would  be  the  vig- 
orous wielding  of  an  O.  K.  rubber  stamp.  On  the  other 
hand,  it  is  not  likely  that  the  country  would  consent  to 
the  choice  of  New  York  for  the  headquarters  of  central 
banking  as  many  persons  would  think  they  could  see 
Wall  Street  domination  in  that.  But  if  New  York, 
Chicago.  St.  Louis,  New  Orleans,  Kansas  City,  San 
Francisco  and  other  financial  centres,  possibly  more  than 
fifteen,  the  number  named  in  the  Aldrich  Plan,  should 
be  treated  as  separate  reserve  centres,  no  political  or 


SEPARATE  RESERFE  ASSOCIATIONS 


other  objection  ought  to  be  raised.  Also  it  is  reason- 
able to  suppose  that  future  political  control  of  sep- 
arate reserve  associations  would  be  more  nearly  im- 
possible than  of  one  association  with  branches,  espe- 
cially if  the  one  should  have  headquarters  in  Washing- 
ton, the  country's  political  centre.  And  if  any  unfore- 
seen evil  should  be  found  in  any  separate  reserve  associ- 
ation it  could  be  easily  corrected  by  the  Government 
while  an  evil  in  a  great  reserve  association,  ramifying 
through  the  whole  country,  might  be  too  closely  associ- 
ated with  an  evil  of  governmental  administration  itself. 
The  best  chance  for  the  development  of  great  discount 
markets  seems  to  lie  in  each  market  having  its  own  re- 
serve association  to  depend  upon  in  time  of  need,  the 
managers  in  each  case,  being  closely  in  touch  with  local 
conditions,  understanding  the  value  of  local  securities 
and  of  local  commercial  paper  and  standing  ready  to  act 
quickly  and  intelligently  and  with  no  more  considera- 
tion for  politics  than  is  ever  shown  by  the  officers  of 
any  one  of  the  clearing  house  associations  throughout 
our  country.  The  development  of  such  broad  discount 
markets  as  should  command  the  confidence  of  European 
bankers  and  investors  would  be  of  incalculable  benefit 
in  giving  steadiness  to  our  rates  for  money.  An  advance 
in  the  discount  rate  at  London  now  draws  funds  from 
Paris  or  Berlin  and  an  advance  in  the  discount  rate  at 
New  York  ought  to  draw  European  funds  with  almost 
equal  rapidity,  now  that  we  have  five-day  steamships.  A 
great  New  York  Reserve  Association  would  be  able  to 
give  the  necessary  assurance  to  foreign  money  lenders 
both  as  to  security  against  loss  and  as  to  the  employ- 

10 


SEPARATE  RESERVE  ASSOCIATIONS 


inent  of  funds  for  definite  periods,  sufficiently  long  to 
warrant  the  expense  of  their  transfer.  Between  foreign 
institutions  and  a  New7  York  Reserve  Association  or 
other  large  American  associations  there  could  be  inter- 
course by  cable  without  fear  on  the  part  of  foreigners 
of  American  political  interference  in  decisions.  There 
could  be  swift  and  wholly  business-like  action. 

Separate  reserve  associations  would  have  no  need  for 
a  uniform  rate  of  rediscount  or  a  universal  rule  as  to  the 
securities  which  might  be  accepted  or  the  quality  of  the 
paper  which  might  be  rediscounted.  Any  uniformity 
which  is  suitable  for  countries  of  very  small  area  like 
England,  France  and  Germany  might  not  work  well 
here.  In  a  land  of  so  great  extent  as  our  own,  securities 
which  are  well  known  in  one  place  might  be  unknown 
in  another;  and  at  any  given  time,  the  same  rate  of  in- 
terest, discount  or  commission  might  be  too  high  in  one 
place  and  too  low  in  another.  Lately,  too,  some  Ameri- 
can bankers  have  expressed  the  opinion  that  some  por- 
tion of  the  deposits  of  a  national  bank  might  properly 
be  loaned  upon  farm  mortgages,  for  a  few  years  at  a 
time,  although  these  deposits  are  subject  to  check  or 
draft  at  sight.  Now,  surely,  if  there  is  to  be  any  practice 
of  this  nature,  it  ought  to  be  confined  strictly  to  the  lo- 
calities which  want  it  and  w'hich  are  willing  to  pay 
whatever  penalty,  if  any,  the  practice  may  exact. 

Monopolistic  control  of  separate  reserve  associations 
would  be  as  impossible  as  it  now  is  of  clearing  house  as- 
sociations for  each  member-bank  and  member-trust- 
company  would  have  one  vote  as  is  now  the  case  in 

11 


SEPARATE  RE SERF E  ASSOCIATIONS 


clearing  house  associations,  no  regard  being  given  to 
the  comparative  importance  of  different  members. 

Separate  associations  would  exchange  reports  and 
general  courtesies  because  the  governors  of  all  associa- 
tions would  be  actuated  by  a  similar  motive,  that  ot 
steering  their  respective  communities  clear  of  financial 
disaster.  The  competition  among  banks,  in  seeking 
business,  would  have  no  counterpart  among  reserve  as- 
sociations, the  object  of  these  being  the  promotion  of 
prosperity  and  it  being  evident  that  any  financial  ob- 
stacle anywhere  might  make  trouble  in  many  places.  It 
would  be  natural  for  these  associations  to  help  each 
other  even  as  the  Bank  of  England  and  the  Bank  of 
France  help  each  other.  Financial  tranquillity  in  either 
country  is  advantageous  to  both  countries. 

Each  reserve  association  would  act  quite  as  much  for 
the  benefit  of  all  its  member  organizations  as  does  each 
clearing  house  association  but  should  act  also  for  the 
benefit  of  the  community ;  and,  to  be  able  to  do  this  must 
have  the  confidence  of  the  community.  Therefore,  the 
officers  of  reserve  associations  should  not  be  officers  of 
component  banks,  but  the  rule  of  the  Bank  of  England, 
should  be  followed  in  keeping  active  bankers  out  of  its 
court  of  governors,  the  public  thereby  counting  upon 
disinterestedness  in  any  action  of  the  central  body,  no 
group  of  financiers  being-  able  to  get  its  assistance 
against  any  other  group  or  for  the  purpose  of  accom- 
plishing any  coup  de  finance.  Altruism  is  important  in 
central  banking  as  further  shown  in  the  rule  of  the  great 
English  bank,  allowing  only  one  vote  to  a  stockholder, 
not  allowing  the  customary  vote  per  share,  for  while  the 

12 


SEPARATE  RES ERF E  ASSOCIATIONS 


bank  must  earn  dividends  it  must  also  serve  the  country. 
For  instance,  it  must  keep  idle  a  large  reserve  against 
the  temptation  to  increase  its  loans  and  so  earn  larger 
profits.  The  temptation  might  be  too  great  if  votes  per 
share  were  allowed. 

In  the  management  of  the  Bank  of  England  too,  there 
is  another  good  point  which  could  be  copied  by  separate 
associations : — the  Government  has  no  voice  and  as  the 
Government's  voice  is  sometimes  only  the  politicians' 
voice  it  is  important  to  note  that  the  officers  of  separate 
reserve  associations  would  not  naturally  affiliate  with 
government  officials,  while  the  officers  at  a  headquarters 
in  Washington  would  almost  necessarily  get  some  po- 
litical bias.  Finance  and  politics  make  an  undesirable 
compound,  extremely  dangerous  under  imaginable  con- 
ditions. Under  the  Aldrich  Plan  some  government  of- 
ficers have  important  places  although  central  banking- 
is  not  a  governmental  function,  properly  speaking. 
The  statesman's  place  should  .not  be  to  assist  in  manag- 
ing but  to  watch  for  unfairness  in  management,  in  order 
to  expose  and  correct  it. 

An  association  of  national  scope  must  have  a  head- 
quarters;  and,  while  London,  Paris  or  Berlin  is  the  un- 
questioned place  for  a  central  office  in  England,  France 
or  Germany,  being  the  financial  centre,  in  each  country, 
respectively;  yet,  those  who  advocate  an  American 
national  reserve  association  look  upon  New  York,  our 
financial  centre,  as  an  impossible  place  and  choose 
Washington,  a  city  which  has  no  comparative  import- 
ance in  business  or  finance,  and  which  is  objectionable 
because  it  is  the- seat  of  government  and  the  hot-bed  of 

13 


SEPARATE  RESERVE  ASSOCIATIONS 


political  activity.  To  my  mind,  the  unsuitability  of  the 
United  States  for  a  national  reserve  association  is  indi- 
cated also  by  the  fact  that  nobody  takes  any  interest  in 
the  choice  of  St.  Louis,  rather  than  Washington,  for 
the  present  centre  of  population  is  near  to  St.  Louis  and 
may  soon  be  nearer.  Still,  if  we  are  to  look  ahead  re- 
garding the  centre  of  population  we  must  consider  the 
claims  of  Kansas  City  and  that  city,  indeed,  has  a  distinct 
claim  because  it  is  only  a  short  distance  from  our  geo- 
graphical centre.  If,  however,  we  have  separate  reserve 
associations  each  one  would  have  whatever  importance 
may  belong  to  it,  now,  and  would  have  its  own  fair 
chance  to  grow  in  importance. 

Each  reserve  association  in  this  country  would  have 
sufficient  strength  for  its  locality,  in  the  capital  and  sur- 
plus of  the  institutions  composing  it,  supposing  those 
now  in  clearing  house  associations  to  become  members. 
We  should  have  a  New  York  Reserve  Association  five 
times  as  strong  as  the  Bank  of  England,  the  most  in- 
fluential bank  in  the  world,  a  Chicago  Reserve  Associa- 
tion of  greater  strength  than  that  great  bank;  and, 
everywhere,  we  should  have  associations  corresponding 
in  strength  to  the  needs  of  their  communities.  The 
$450,000,000  capital  and  surplus  of  the  New  York  Re- 
serve Association,  however,  would  be  the  sufficient  as- 
surance to  all  banks  and  bankers,  that  their  New  York 
balances  certainly  would  be  shipped  to  them  promptly 
when  ordered  and  in  currency  or  other  form  as  desired, 
as  hereinafter  specifically  provided  for.  Such  an  abso- 
lute assurance  would  generally  prevent  the  actual  order- 
ing of  the  shipment,  for  among  banks  as  among  custom- 

14 


SEPARATE  RESERVE  ASSOCIATIONS 


ers  of  banks,  the  demand  for  money  grows  with  the 
fear  of  delay  or  fear  of  trouble  in  getting  it,  any  sup- 
posed elusiveness  in  money  exciting  the  grabbing  in- 
stinct. In  this  connection  it  should  be  noted  that  the 
Xew  York  financial  situation  has  been  greatly  improved 
since  the  panic  of  1907  by  the  taking  of  trust  companies 
into  the  Clearing  House  Association,  for  instead  of  being 
a  menace,  they  now  add  to  the  strength  of  the  great 
financial  body.  A  New  York  possible  demand  for  money 
has  been  changed  to  a  New  York  extra  supply  of  money, 
to  help  meet  the  country's  demand.  And  the  country's 
crop-moving  demand  will  not  press  very  heavily  upon 
Xew  York  in  the  future.  Factories  spring  up  in  great 
crop-growing  states  and  make  an  all-the-year  demand 
for  both  money  and  banking  facilities,  large  portions  of 
the  crops  being  consumed  near  their  places  of  produc- 
tion. The  alternating  eastward  and  westward  tidal 
waves  of  currency  will  become  unimportant  currents. 

The  personnel  of  separate  reserve  associations  in 
every  community  would  be  the  very  men  who  best  un- 
derstand financial  conditions  at  all  times,  the  men  who 
are  chosen  by  clearing  house  associations  to  act  upon 
loan  committees  in  critical  periods.  They  might  almost 
be  named  in  advance  if  they  would  dissociate  themselves 
from  other  financial  duties.  And  mere  personnel  may 
be  of  incalculable  importance  at  any  moment,  for  bank- 
ing is  somewhat  of  a  psychological  science  and  what  is 
in  the  public  mind  or  is  skilfully  put  into  it,  at  exactly 
the  right  moment,  may  make  people  generally  leave 
money  in  banks,  instead  of  taking  it  out  of  banks  as 
otherwise  would  be  the  case.  In  the  panic  of  1907,  it 

15 


SEPARATE  RES  ERF  E  ASSOCIATIONS 


was  not  the  officials  in  Washington  who  knew  what  to 
do  and  how  to  do  it ;  nor,  in  the  future,  is  it  likely  that 
there  would  be  found  any  greater  ability  or  greater 
knowledge  at  the  Washington  headquarters  of  a  national 
reserve  association  than  at  the  various  separate  offices 
of  many  associations.  A  difficulty  appears  in  the  cir- 
cumstance that  the  most  desirable  men  for  governor, 
and  deputy  governors  would  be  those  earning  large  sal- 
aries or  having  large  incomes  from  their  own  businesses  ; 
but,  reserve  associations  could  afford  to  pay  well  for 
freedom  from  panic  or  for  reliable  information  and  judg- 
ment to  correct  panicky  tendencies  in  advance.  And  the 
most  desirable  financiers  would  be  tempted  by  positions 
of  the  highest  honor  and  the  greatest  responsibility. 

As  all  the  good  features  of  rediscounting  and  central 
banking  could  be  put  in  operation  through  possibly  un- 
objectionable legislation  and  by  amending  certain  laws 
now  on  the  statute  books,  it  would  seem  to  be  advisable 
under  present  political  conditions,  to  strive  for  financial 
reform  in  this  way  rather  than  by  the  unnecessarily  com- 
prehensive Aldrich  Plan.  To  attempt  to  deal  with  the 
national  bank  note  question,  for  instance,  without  know- 
ing what  to  do  with  the  national  bonds  upon  which  the 
notes  are  based  is  only  to  complicate  matters.  And  now 
that  the  Government  has  stopped  the  issuing  of  the  kind 
of  bonds  upon  which  new  notes  might  be  based,  the 
wrhole  note  question  will  grow  less  and  less  important 
as  the  country's  trade  grows  larger  and  larger,  quite  as 
the  greenback  question  has  lost  importance  through  the 
fixing  of  the  total  of  greenbacks  at  $346,000,000,  a  total 
which  once  seemed  very  big.  Then  too,  no  sc'heme  of 

16 


SEPARATE  RESERVE 


currency  reform  need  say  anything  about  gold,  for  gold 
will  take  care  of  itself  in  any  commerical  country  which 
makes  this  metal  the  standard  of  value  and  which  gives 
gold  coins  and  gold  certificates  plenty  of  room  in  the 
circulation.  With  a  foreign  trade  about  fifty  per  cent. 
larger  than  our  own,  and  with  an  enormous  "unfavorable 
balance  of  trade,"  so  called,  England  gets  and  keeps  all 
the  gold  she  needs,  simply  by  limiting  the  amount  of 
paper  money  which  may  be  issued,  the  minor  movements 
of  gold  being  affected  by  the  skill  of  the  governors  of 
the  Bank  of  England  and  through  their  changes  in  the 
Bank's  rate  of  discount. 

We  have  a  law  now  which  provides  for  emergency 
currency  to  be  issued  to  National  Currency  Associations 
composed  only  of  national  banks  and  it  should  not  be 
impossible  to  extend  this  law  beyond  its  1914  expiration 
and  to  amend  it  so  as  to  recognize  local  reserve  associa- 
tions composed  of  banks  and  trust  companies.  These 
associations  should  be  incorporated  under  a  new  federal 
law  carefully  drawn  to  exactly  suit  the  case  and  the  new 
money  s'hould  be  engraved  in  their  names  instead  of  in 
the  names  of  the  banks,  the  government  disbursing  of- 
ficers being  empowered  to  take  such  security  and  com- 
mercial and  financial  paper  as  is  now  provided  for  and 
also  the  guarantee  of  these  reserve  associations,  the 
limit  of  new  money  for  any  association  being  determined 
by  the  capital  and  surplus  of  such  association.  Of  course, 
the  Government  should  be  as  absolutely  secured  against 
loss  as  it  is  under  the  present  law  and  while  there  must 
be  much  more  certainty  than  there  is  now  that  the 
emergency  money  would  come  out  instantly  and  without 

17 


SEPARATE  RE  SERF  E  ASSOCIATIONS 


even  a  chance  of  possible  delay,  yet  an  apparently  con- 
tradictory point  must  be  well  covered  also;  the  emer- 
gency money  must  not  come  out  unless  there  is  a  real 
emergency.  In  England,  it  has  been  learned  by  experi- 
ence that  there  is  no  need  for  emergency  money  (which 
over  there  means  the  suspension  of  the  Bank  Act  of 
1844)  until  the  rate  of  discount  rises  to  10%  @  12% 
and  until  this  high  rate  shall  have  induced  an  inward 
flow  of  gold;  and,  as  a  10%  rate  is  sufficient  to  bring 
gold  "out  of  the  ground,"  there  has  been  no  suspension 
of  the  Act  in  half  a  century,  as  before  remarked.  Ad- 
mitting, of  course,  that  any  rate  of  discount  or  interest 
which  would  be  high  enough  in  England  might  not  be 
high  enough  in  America,  yet  we  must  see  that  the  Eng- 
lish principle  of  increasing  the  rate  for  money,  in  order 
to  cause  a  reduction  in  the  demand  for  it,  is  scientifically 
correct.  Certainly  it  could  be  followed  here  if  we  pay 
sufficient  attention  to  American  conditions.  In  each  of 
our  separate  reserve  associations,  the  financiers  in 
charge  would  have  both  local  and  general  circumstances 
in  mind  and  if  unhampered  by  unnecessary  rules  would 
develop  the  skill  of  Bank  of  England  governors.  It 
would  not  take  very  long  to  learn  that  if  new  money 
should  come  out  too  cheaply  it  might  serve  only  to 
heighten  speculative  fever  or  to  increase  the  exportation 
of  gold,  while,  on  the  other  hand,  if  a  large  amount  of 
new  money  is  not  in  sight  people  will  hoard  what  they 
have.  The  tremendous  importance  of  the  personnel  in 
central  banking  is  apparent  if  we  consider  all  the  effects 
of  changing  the  rate  of  discount  or  interest.  The  highest 
order  of  sagacity  and  disinterestedness  may  be  secured 

18 


SEPARATE  RESERVE  ASSOCIATIONS 


for  the  management  of  independent  reserve  associations, 
just  as  it  is  now  for  the  committees  of  clearing  house 
associations,  but  it  is  unlikely  that  our  best  financiers 
would  be  ready  always  to  act  under  the  instructions  of 
men  at  any  headquarters,  however  selected  or  if  appoint- 
ed by  the  President,  for  sometimes  in  the  past  it  has 
happened  that  even  secretaries  of  the  Treasury  have 
been  appointed  more  on  account  of  political  influence 
than  on  account  of  financial  skilfulness.  In  New'\ork, 
and  I  presume  elsewhere,  the  highest  order  of  financial 
talent  would  claim  the  most  implicit  trust  and  reliance 
on  the  part  of  everybody  concerned  and  would  stand  no 
outside  guidance  or  interference. 

The  cost  of  new  or  emergency  money  would  be  high 
because  the  Government  should  be  compensated  for  its 
expense  and  because  the  reserve  associations  should  be 
paid  for  their  guarantee.  Graduating  rates  of  three, 
four  and  five  per  cent,  per  annum  would  seem  to  be  fair 
for  the  Government,  the  rate  increasing  as  an  association 
increased  its  takings  of  its  allotment,  and  the  charge  to 
run  from  the  date  of  issue  to  the  date  of  return  of  the 
new  money,  or  the  date  of  deposit  of  other  money  in- 
stead, for  the  identical  money  might  not  find  its  way 
back.  The  charge  of  a  reserve  association  to  one  of  its 
components  should  depend  upon  circumstances ;  and 
in  a  critical  time  might  vary  from  day  to  day,  the 
changes  being  ordered  in  accordance  with  a  swiftly 
changing  situation.  While  the  Government's  charge 
should  be  fixed  and  the  duties  of  every  government  dis- 
bursing officer  be  accurately  defined  by  law  so  as  to  leave 
no  opportunity  for  judgment  on  his  part,  such  officer 

19 


SEPARATE  RESERVE  ASSOCIATIONS 

not  necessarily  possessing  any,  yet  the  widest  possible 
latitude  should  be  given  to  the  chosen  heads  of  a  reserve 
association,  these  persons  being  selected  for  the  very  rea- 
son that  they  would  know  best  wrhat  to  do  in  an  emer- 
gency. At  one  time,  they  might  simply  state  that  an  ex- 
pert and  disinterested  investigation  had  shown  the 
soundness  of  a  certain  institution;  at  another  they  might 
put  the  association's  endorsement  upon  a  bank's  paper 
for  a°  small  fee;  at  another,  they  might  take  over  two  or 
three  banks'  assets  and  put  cash  in  their  place  to  m'eet 
a  run  of  customers,  and,  here  again  the  charge 
would  be  low  if  there  were  no  ultimate  risk;  but,  at 
still  another  time,  or  if  there  should  be  continued  fi- 
nancial disturbance  after  ordinary  action  had  proved  to 
be  ineffectual,  then  the  guaranteeing  or  rediscounting 
charges  should  grow  heavier,  making  the  process  corre- 
spond to  the  well-proved  Bank  of  England  methods,  the 
greater  and  greater  cost  of  new  money  inducing  every- 
body to  get  along  without  it  so  far  as  possible.  Panics 
are  not  uncontrollable  because  of  a  high  rate  of  discount 
or  interest,  this  expense  being  merely  for  short  periods. 
In  New  York  there  could  be  no  panic  if  people  knew  that 
$450,000,000  were  instantly  available  no  matter  what 
the  expense  of  getting  it.  And  with  a  secure  feeling  at 
the  financial  centre  there  would  be  no  feeling  of  inse- 
curity anywhere  even  without  any  other  reserve  associa- 
tions although  it  would  be  as  well  to  have  them.  For 
instance,  the  Chicagoans  would  enjoy  feeling  that  $100,- 
000,000  of  emergency  money  was  available  for  them  at 
a  moment's  notice.  Banks  and  bankers  are  not  entitled 
to  a  supply  of  cheap  money,  whenever  they  ask  for  it,  for 

20 


SEPARATE  RESERVE  ASSOCIATIONS 


that  spells  inflation  but  they  are  entitled  to  the  assurance 
of  being  able  to  get  new  money  when  they  are  willing  to 
suffer  a  penalty  for  their  over-confidence  or  for  the  over- 
trading of  their  customers.  Merchants  have  to  pay  fire 
insurance  premiums  all  the  time  and  bankers  should  not 
object  to  an  assurance  charge  once  in  a  \vhile.  Nobody 
is  exempt  from  the  danger  of  losses  to  come  from  the 
carelessness  of  others. 

Some  bankers  and  some  merchants  object  to  any  tax 
upon  emergency  money,  the  merchants,  especially,  want- 
ing low  interest  rates,  all  the  time.  But  is  it  not  plain, 
if  an  abundance  of  new  money  could  have  been  got  in 
1905  and  1906,  without  additional  expense,  that  prices 
wTould  have  been  carried  higher;  that  speculation  would 
have  exceeded  much  further  the  bounds  of  prudence ; 
and,  that  the  crash  of  1907  would  have  been  still  more 
disastrous  than  it  actually  was?  Financial  history  says 
this,  I  am  sure.  And  interest  rates  could  not  have  been 
kept  down,  for  always  and  everywhere,  high  interest 
rates  belong  to  periods  of  active  trade  and  speculation. 
Perhaps  it  may  be  some  consolation  to  merchants  who 
want  low  interest  rates,  to  reflect  that  low  interest  rates 
go  with  low  rates  of  profit.  Lenders  of  money  in  old 
and  comparatively  non-progressive  commercial  coun- 
tries, take  little  risk  and  get  little  compensation.  In  these 
same  countries,  there  may  be  found  low  rents  and  low 
wages.  Better  be  satisfied  with  those  American  pro- 
gressive activities  which  make  rents,  wages  and  profits 
high,  while  giving  a  fair  share  of  the  general  income  to 
the  individuals  who  keep  capital  to  lend  and  who  thus 
help  along  the  general  prosperity. 

21 


SEPARATE  RESERVE  ASSOCIATIONS 


It  seems  advisable  that  each  reserve  association  should 
have  a  working  capital,  each  member,  bank  or  trust 
company  being  permitted  by  law  to  contribute  a  definite 
portion  of  its  own  reserve.  The  keeping  of  a  certain  per- 
centage of  deposits  as  a  reserve  belongs  to  unscientific 
banking,  the  approved  way  being  to  concentrate  the  re- 
serve and  then  to  let  the  highest  order  of  financial  ability 
decide  how  large  it  shall  be,  the  magnitude  of  the  reserve 
changing  with  the  pulsations  of  trade  and  finance  but  the 
master  minds  always  watching  the  reserve  and  all  the 
influences  which  affect  it.  In  England,  no  bank  is 
obliged  to  tell  what  portion  of  its  reserve  is  in  its  vaults 
and  what  portion  stands  to  its  credit  at  the  Bank  of  Eng- 
land. The  business  men  of  New  York  would  enjoy 
greater  financial  security  if,  say,  $100,000,000  were 
taken  from  individual  bank  reserves  and  placed  in  the 
vaults  of  a  New  York  Reserve  Association,  to  be  used 
without  question  or  interference,  whenever  the  officers 
in  charge  should  desire  to  use  it,  partly  or  wholly,  for 
what  they  considered  to  be  the  interests  of  everybody  in 
the  community,  not  only  the  interests  of  banks,  in  a  nar- 
row view.  In  other  centres  the  working  capital  would  be 
proportionally  less  but  I  believe  that  everywhere  there 
would  be  sufficient  concentration  of  available  cash  in 
the  hands  of  expert  and  disinterested  persons,  to  over- 
come the  ordinary  financial  disturbances  without  resort 
to  the  emergency  money  in  the  hands  of  government 
disbursing  officers.  Each  reserve  association  might  de- 
cide for  itself  what  portion  of  a  bank's  reserve  should 
be  contributed  for  general  use  and  benefit.  Isolated 
banks  feel  the  need  for  cash  in  hand  more  strongly  than 

22 


SEPARATE  RESERVE  ASSOCIATIONS 


do  banks  which  have  many  close  and  friendly  neighbors. 
The  advantage  of  prompt  action  in  finance  is  sometimes 
the  same  as  that  of  prompt  action  in  small  fires.  We 
fully  recognize  that  a  very  little  fire  may  grow  into  a 
conflagration  and  some  time  we  shall  learn  that  almost 
any  financial  disturbance  can  be  so  skilfully  treated  as 
narrowly  to  limit  its  influence.  Something  of  the  sort 
happens  now  when  great  banks  or  bankers  cure  the  "sore 
spots"  on  the  financial  body,  by  substituting  cash  for 
other  assets  but  such  work  as  this  should  never  result 
directly  to  the  benefit  of  individual  banks  or  bankers— 
the  whole  community's  benefit  should  always  be  the  sole 
consideration.  It  may  fit  the  case  to  say  that  we  need  a 
Financial  Board  of  Health. 

Early  in  1908  the  writer  had  the  honor  of  appearing 
before  the  Banking  &  Currency  Committee  of  the  House 
of  Representatives  in  advocacy  of  the  development  of  the 
duties  and  privileges  of  clearing  house  associations  and 
of  a  plan  for  depending  upon  them  for  general  financial 
reform.  In  the  light  of  further  study  and  reflection, 
assisted  by  the  publications  of  the  National  Monetary 
Commission,  this  present  plan  has  been  evolved  and  is 
now  offered  but  with  no  thought  that  it  may  not  easily 
be  improved  or  that  important  errors  may  not  be  point- 
ed out.  Critics  may  say  that  a  better  plan  would 
have  been  offered  if  French,  German  and  other  experi- 
ences in  central  banking,  as  well  as  English  experience 
had  been  drawn  upon,  but  a  fair  answer  would  seem  to 
be  that  those  experiences  might  prove  to  be  misfits  when 
brought  to  America :  The  French,  because  a  large 
portion  of  French  business  is  done  with  money 

23 


SEPARATE  RESERVE  ASSOCIATIONS 


rather  than  checks,  French  bankers  not  yet  drawing  all 
the  little  hoards  of  money  into  their  tills;  the  German 
because  we  could  not  tolerate  in  America  the  meddle- 
someness of  the  officials  which  people  are  used  to  in  Ger- 
many; and  the  financial  experience  in  other  countries 
than  England  is  unimportant  because  of  every  other 
country's  lack  of  a  vast  internal  and  external  trade. 
English  finance  on  the  contrary  on  account  of  its  ex- 
treme fineness  of  development  and  because  it  has  proved 
suitable  to  a  people  used  to  a  great  volume  of  trade 
and  who  care  as  much  for  individual  liberty  of  action 
as  we  ourselves  care,  may  well  be  draw^n  upon  for 
our  guidance,  yet  with  the  fullest  recognition  that  Amer- 
ican business,  American  politics  and  American  life  have 
their  own  distinctive  characteristics. 

Let  us  now  take  a  new  and  a  broader  view  of  the  sub- 
ject of  financial  reform.  We  need  immunity  from  nation- 
sweeping  hallucinations  as  well  as  from  acute  monetary 
crises.  Our  people  always  have  had  a  mania  for  a  plenti- 
ful supply  of  money  and  generally  have  been  careless 
about  the  quality  of  it  although  at  the  time  of  the  found- 
ing of  our  Government,  more  than  two  centuries  already 
had  elapsed  since  Sir  Thomas  Gresham  made  the  discov- 
ery that  a  superior  quality  of  money  would  be  driven  out 
of  circulation  in  any  country,  by  an  inferior  quality, 
unless  the  latter  were  limited  in  amount.  It  is  not  true 
that  Americans  know  less  than  other  people  about  mone- 
tary science  but  it  is  true  that  Americans  have  need  for 
greater  knowledge.  It  seems  not  to  have  occurred  to  our 
statesmen,  financiers  and  educators  that  we  vote  almost 
directly  upon  financial  questions  and  that  we  ought  to  be 

24 


SEPARATE  RESERVE  ASSOCIATIONS 


taught  how  to  vote  upon  them.  It  is  disgraceful  that  so 
late  as  the  end  of  the  nineteenth  century,  our  financial 
quacks  were  able  to  find  more  patients  than  our  medical 
quacks.  No  sound-money  campaign  against  bi-metallism 
and  against  free-silver-coinage  would  have  been  neces- 
sary if  our  people  had  been  properly  instructed  in  school 
and  college,  but  it  is  nevertheless  a  fact  that  both  houses 
of  congress  swallowed  the  nostrums  of  the  quacks. 
Money  has  been  the  thing  which  everybody  wanted  and 
nobody  understood  and  even  now  there  is  no  certainty 
that  the  coming  generation  will  be  very  much  better 
informed  than  the  generation  which  nearly  wrecked  our 
national  honor. 

If,  too,  we  consider  the  banks  rather  than  the  money, 
we  find  a  corresponding  popular  misapprehension.  In 
the  first  half  of  our  national  life,  banks  were  tolerated 
as  necessary  evils ;  in  the  second  half,  we  commonly 
think  of  them,  only  as  contrivances  of  the  rich,  for  add- 
ing to  their  riches.  It  is  possible  for  a  boy  to  get 
through  school  and  college  without  learning  a  great  deal 
about  the  difference  between  a  toy  savings  bank  and  the 
savings-bank  on  the  street-corner,  and  there  are  number- 
less well-educated  people,  as  education  goes,  who  do  not 
understand  the  services  which  are  rendered  by  the  banks 
of  discount  and  deposit.  There  has  been,  always,  a  gen- 
erous feeling  for  borrowers,  often  expressed  in  legisla- 
tion but  legislation  is  not  apt  to  favor  the  banksr 
although  they  are  borrowers  as  truly  as  they  are  lenders. 
And  the  banks  are  entitled  to  especial  consideration  for 
borrowing  only  the  money  which  nobody  can  use  and 
lending  it  to  the  individuals  who  are  able  to  use  it.  By 

25 


SEPARATE  RES  ERF  E  ASSOCIATIONS 


the  necromancy  of  banks,  the  money  which  you  do  not 
want  now  but  may  want,  at  any  moment,  is  given 
greater  facility  for  use  by  yourself,  through  your  check- 
book, and  is  placed  at  the  disposal,  also,  of  somebody 
else,  the  usefulness  of  your  money  being  nearly  or  quite 
doubled.  The  total  of  bank-deposits  is  near  enough  to 
the  total  of  bank-loans  to  warrant  this  statement,  the 
reserves  of  the  banks  being  largely  the  capital  and  sur- 
plus which  belongs  to  the  stockholders.  In  modern  trade 
and  industry,  the  banks  have  become  the  indispensable 
lubricators  of  the  whole  machinery;  and,  the  workman 
who  knows  that  his  little  machine  would  "freeze  solid'' 
if  not  supplied  with  oil  or  grease,  ought  to  have  been 
taught  before  leaving  school  why  factories  have  to  stop 
running  when  the  work  of  the  banks  is  disturbed. 
Workmen  are  ready  to  ask  for  legislation  for  their  own 
benefit  and  might  be  shown  not  only  that  banks  are  their 
.best  friends  but  that  banks  earn  dividends  exactly 
as  workmen  earn  wages,  workmen  giving  useful  employ- 
ment to  idle  faculties  and  banks  giving  useful  employ- 
ment to  idle  funds. 

There  can  be  no  question  of  the  desirability  of  general 
enlightenment  in  a  land  of  universal  suffrage  but  any 
suggestion  of  means  to  the  end  is  a  proper  subject  of  con- 
troversy. And,  naturally,  criticism  must  be  expected  for 
the  new  idea  that  separate  reserve  associations  could  be 
used  in  an  educative  way.  It  is  significant,  however, 
that  education  in  America  depends  upon  separate 
schools  and  separate  colleges  and  therefore  it  will  not  do 
to  assume  that  no  connection  of  any  sort  can  possibly  be 
established  between  our  educators  and  the  officers  of 

26 


SEPARATE  RESERVE  ASSOCIATIONS 


separate  reserve  associations.  At  present,  financiers  may 
take  little  or  no  interest  in  the  curriculum  of  any  school 
but  this  does  not  prove  that  they  never  will  take  much 
interest,  for  against  such  a  supposition  may  be  placed 
the  fact  that  men  of  large  affairs  do  serve  upon  Boards 
of  Education.  Financiers  are  as  public-spirited  as  other 
busy  men  but  no  way  has  been  open  for  them  to  aid  our 
educators.  And,  too,  there  is  a  prejudice  against  men 
who  are  successful  in  finance.  Doubtless  also  there  are 
localities  where  socialism  has  gained  control  of  some 
teachers  and  professors  and  these  persons  would  be  sus- 
picious of  anything  coming  from  bank  officers,  for  bank 
officers  belong  to  the  conservative  class.  Difficulties  will 
be  found  in  the  way  of  showing  our  youth  what  they 
ought  to  be  shown  of  rudimentary  financial  principles 
but  if  they  are  not  shown,  then  there  must  continue  to 
grow  the  power  of  that  sort  of  political  capital  which 
sometime  will  measure  its  strength  against  financial  cap- 
ital. However,  the  cause  of  education  is  not  hopeless  for 
if  we  establish  separate  reserve  associations,  we  should 
have  as  their  governors  men  who  know  all  about  finan- 
cial subjects  and  yet  who  are  dissociated  from  financial 
institutions  and  therefore  outside  of  the  struggle  for 
wealth.  In  any  locality,  a  governor  of  a  reserve  asso- 
ciation, he  having  a  suitable  reputation,  could  make  it 
known  that  the  wrelfare  of  the  banks  is  bound  up  in  the 
welfare  of  the  people ;  and,  in  due  time,  he  could  get  put 
into  text-books  or  at  least  into  the  syllabuses  for 
teachers  enough  to  make  a  beginning  in  financial  instruc- 
tion. A  good  governor  of  a  reserve  association  would  be 
willing  not  only  to  do  his  best  for  his  association  in  his 

27 


SEPARATE  RESERVE  ASSOCIATIONS 


own  time,  but  to  help  his  association  in  the  future,  and 
he  would  see  that  education  is  an  important  ally  in  pre- 
serving that  financial  orderliness  under  which  trade  and 
industry  make  their  greatest  progress.  Education  in 
finance  is  like  education  in  other  matters ;  knowledge 
creates  thirst  for  more  knowledge.  A  youth  to  whom  is 
explained  the  intrinsic  value  of  gold  money  and  the 
promissory  character  of  other  money,  will  be  likely  to 
learn,  before  he  is  able  to  vote,  what  it  is  which  gives  full 
purchasing  power  to  bits  of  paper;  and,  as  the  chances 
are  ten  to  one  that  he  will  be  a  wage-earner  and  not  a 
wage-payer,  he  will  be  ready  to  vote  to  receive  only  that 
money  which  is  as  good  as  gold.  A  youth  who  is  taught 
something  about  the  work  of  banks  of  discount  and 
deposit,  at  the  time  he  is  taught  "Interest  and  Bank  Dis- 
count", may  have  his  curiosity  excited  to  learn  more  on 
the  subject  and  by  the  time  he  is  able  to  vote  may  have 
a  good  appreciation  of  banks  as  public  servants,  and  not 
be  willing  to  listen  to  demagogues  who,  for  their  own 
ends,  would  harass  the  banks  as  well  as  other  institu- 
tions of  civilization.  A  reserve  association  as  a  Finan- 
cial Board  of  Health  would  not  overlook  the  rapidity 
with  which  young  people  become  factors  for  good  or  ill. 
The  advantage  which  separate  reserve  associations,  as 
educators,  would  have  over  a  national  association  will 
be  apparent  if  we  look  back  on  the  silver  lunacy.  Con- 
gressmen went  crazy  and  if  there  had  been  a  national 
reserve  association,  at  Washington,  the  officers  would 
have  been  divided  among  themselves.  Bi-metallism 
might  have  been  given  a  favorable  word  in  school-books 
with  the  result  that  our  present-day  voters  would  have 

28 


SEPARATE  RESERVE  ASSOCIATIONS 


the  trouble  of  unlearning  much  of  what  they  were  taught 
when  students.  As  a  source  of  information  upon  any 
subject  which  has  been  or  may  be  a  political  question,  a 
national  association  is  liable  to  be  a  failure  or  an  instru- 
ment for  harm.  To  illustrate  this  point  wfe  may  fancy 
any  national  association  attempting  to  teach  the  princi- 
ples of  taxation  and  trying  to  be  non-partisan  between 
the  advocacy  of  revenue  duties  and  the  advocacy  of  high 
protection.  While  it  should  not  be  denied  that  some  one 
of  all  the  separate  reserve  associations  might  help 
to  spread  a  heresy  yet  it  is  certainly  true  that  the  lack  of 
authority  of  any  one  over  the  others  would  limit 
the  injury,  in  both  extent  and  duration.  Competition 
among  separate  reserve  associations  to  promote  enlight- 
enment on  the  principles  of  money  and  finance  would  be 
started  by  the  most  enterprising  association  actually  get- 
ting some  of  the  simplest  axioms  put  into  some  school 
books.  Another  association,  learning  of  this,  would  be 
able  to  make  an  improvement  of  some  sort ;  and,  there- 
after, no  backward  step  would  be  possible.  The  separate 
reserve  associations  of  our  country  in  the  course  of  natu- 
ral progress,  would  become  the  recognized  sources  of 
information  and  our  educators  would  be  supplied  with 
what  they  have  lacked  hitherto,  fountains  of  financial 
truths,  unpoisoned  by  the  suspicion  of  either  politics  or 
selfish  interest.  We  cannot  say  what  may  be  the  form 
of  the  next  financial  insanity  to  afflict  the  American 
people  but  we  may  be  sure  that  education  is  the  only 
preventive  of  the  affliction,  whatever  its  peculiarities 
may  prove  to  be. 

29 


SEPARATE  RESERVE  ASSOCIATIONS 


There  is  good  reason  for  leaving  to  the  future,  the  co- 
ordinating of  our  various  kinds  of  paper  money, 
although  we  have  greenbacks  which  ought  to  have  been 
retired  long  ago,  silver  certificates  which  never  should 
have  been  issued,  national  bank  notes  which  slightly 
increase  or  decrease  in  volume,  when  they  should  do  the 
reverse;  and,  although  we  have  gold  certificates  which 
represent  an  ever  increasing  hoard  of  gold  in  the 
Treasury.  The  incongruity  is  not  picturesque  but  we 
may  do  well  to  notice  that  the  greenbacks  and  the  silver 
certificates  do  not  increase ;  that  the  increase  in  national 
bank  notes,  in  a  whole  year  to  October  1,  1911,  has  been 
only  $5,734,040  or  less  than  one  per  cent  of  the  total  of 
such  notes;  and  that  the  increase  in  the  volume  of  gold 
certificates  may  be  looked  upon  with  equanimity,  at  least 
by  everybody  who  took  part  in  any  of  the  struggles  for 
sound  money  which  began  soon  after  the  Civil  War  and 
had  to  be  continued  to  the  victory  of  1896.  There  are  no 
terrors  in  contemplating  the  fact  that  the  volume  of  gold 
certificates,  in  circulation,  has  grown  in  a  single  year 
from  $845,965,959  to  $930,126,029;  and  I  see  only  satis- 
faction in  the  estimation  that  gold  coins  and  gold  cer- 
tificates now  make  up  about  forty-seven  per  cent  of  the 
total  circulation,  whereas,  at  the  time  of  the  resumption 
of  specie  payments  in  1879,  these  moneys  amounted  to 
only  about  fourteen  per  cent  of  the  total.  The  process 
of  increasing  the  percentage  of  gold  money  to  all  money 
is  likely  to  continue  unless  we  interfere  by  new  legisla- 
tion ;  and,  it  is  nearly  certain  that  legislation,  if  effective 
in  putting  new  paper  money  into  circulation,  would 
merely  substitute  such  new  money  for  gold  or  gold  cer- 

30 


SEPARATE  RESERVE  ASSOCIATIONS 

tificates.  It  is  hardly  within  the  ordinary  power  of  law 
to  increase  the  whole  circulating  medium  but  well  within 
its  power  to  drive  gold  out  of  the  country.  It  is  esti- 
mated that  we  have  $3,242,182,715,  total  circulation,  and 
I  am  afraid  that  some  people  reason  that  the  gold  por- 
tion, $1,525,260,488,  should  give  us  a  total  circulation  of 
about  $6,000,000,000,  instead  of  only  $3,242,182,715.  It 
is  easy  to  demonstrate  however,  that  the  $34.35  per 
capita  which  suits  us  at  the  present  time  would  suit  us 
as  well  under  different  laws.  In  other  words,  if  by  any 
banking  arrangement,  in  operation  during  the  past 
decade  or  two  we  had  come  into  the  use  of  a  circulation 
consisting  of  only  one-quarter  gold,  the  difference  would 
be  the  present  European  possession  of  over  $700,000,000, 
gold,  instead  of  the  present  American  possession  of  this 
sum.  We  should  have  exported  this  amount  of  gold,  and, 
as  an  offset,  our  exportation  of  merchandise  and  securi- 
ties would  have  been  somewhat  less  than  they  have  been 
and  our  importations  of  goods  somewhat  greater,  /fnd 
in  the  future,  economy  in  the  use  of  gold  must  have  a 
similar  effect,  merely  the  substitution  of  paper  for  gold 
and  the  releasing  of  gold  for  exportation.  I  should  think 
it  much  better  to  go  on  accumulating  the  metal  even  if 
for  no  other  reason  than  the  comfortable  assurance  of 
being  strong  enough,  monetarily,  to  keep  upon  the  gold 
basis  through  any  great  war,  instead  of  slipping  off  to 
the  paper  basis,  as  in  1801. 

I  see  no  advantage  in  hurrying  to  decide  whether  new 
paper  money  shall  be  issued  by  one  association  or  by 
many  associations  or  by  either,  the  requirement  of 
elasticity  in  our  volume  of  paper  being  satisfied  by  the 

31 


SEPARATE  RESERVE  ASSOCIATIONS 


provision  for  emergency  money,  to  come  out  when 
needed,  and,  to  go  back  when  not  needed.  \Ye  are  grow- 
ing in  wealth  and  population  and  if  we  continue  to  accu- 
mulate gold  we  shall  gain  ground  for  hoping  to  become 
the  world's  financial  centre.  With  the  annual  produc- 
tion of  gold  increasing  and  with  the  American  produc- 
tion up  to  about  $100,000,000  worth  from  which  we  can 
take  about  $70,000,000,  per  annum,  for  use  as  money,  it 
is  folly  for  us  to  try  to  estimate  how  little  we  can  get 
along  with.  If  gold  production  goes  on  increasing,  we 
might,  sometime  in  the  future,  redeem  all  our  paper, 
excepting  gold  certificates;  while,  on  the  other  hand,  if 
gold  production  should  decrease,  we  should  not  be  com- 
pelled to  join  in  a  new* "scramble  for  gold"  that  would 
soon  develop. 

Returning,  now,  to  the  main  subject  of  this  pamph- 
let, let  us  note  that  to  establish  a  national  association 
with  branches,  as  proposed  by  Senator  Aldrich,  or  to 
esfablish  separate  associations,  as  herein  proposed,  is  to 
make  an  experiment ;  and,  this  experiment  involves  a 
new  use  of  finance,  the  most  subtle,  pervasive  and 
powerful  of  all  the  forces  of  modern  life.  In  arranging  to 
use  a  force  which  no  potentate  may  ignore  and  which 
every  government  must  consider  before  beginning  either 
constructive  or  destructive  operations,  caution  seems  to 
be  in  order.  Mistakes  will  be  made  and  will  have  to  be 
corrected  in  case  either  proposition  be  adopted;  but,  in 
one  case,  mistakes  may  be  rectified  easily,  while  in  the 
other  they  might  be  very  serious  and  very  difficult  to 
overcome.  A  national  association,  with  some  presiden- 
tial appointees;  with  the  privilege  of  receiving  the 

32 


SEPARATE  RESERVE  ASSOCIATIONS 


Government's  money;  and,  with  the  duties  and  advan- 
tages pertaining  to  the  financial  agency  of  the  Govern- 
ment, would  have  power  which  the  country,  later  on, 
might  have  good  reason  for  wishing  to  withdraw.  Xow 
the  withdrawal  of  power  or  privilege,  once  given,  is  sure 
to  be  difficult  because  those  who  enjoy  it  are  in  position 
actually  to  use  their  power  or  privilege  in  the  effort  to 
keep  it.  Witness  the  difficulty  of  lowering  any  rate  of 
duty,  in  any  tariff  schedule,  and  how  the  need  for  reduc- 
ing the  duty  on  any  article  really  increases  the  difficulty 
in  the  way  of  reduction.  If,  however,  errors  should  be 
made  in  establishing  separate  reserve  associations,  the 
Government  would  be  free  to  correct  them.  The  point 
of  the  matter  may  be  put  this  way :  if  we  should  estab- 
lish a  national  association  with  branches  and  should  find 
out,  upon  trial,  that  we  ought  instead  to  have  established 
separate  associations,  great  obstacles  would  be  found  in 
the  way  of  dissolution ;  while,  on  the  contrary,  if  we 
should  establish  separate  associations,  it  would  be  com- 
paratively easy  to  bring  about  their  amalgamation, 
should  the  people  so  desire.  The  charters  of  separate 
reserve  associations  could  be  revocable  by  act  of  con- 
gress ;  whereas,  the  charter  of  the  national  association, 
under  the  Aldrich  Plan,  is  to  be  given  a  life  of  fifty  years ! 
Twenty  years  was  the  allotted  life  of  the  charters  of  the 
first  and  the  second  Banks  of  the  United  States ;  and, 
neither  bank  was  able  to  get  authority  to  live  any  longer 
although  each  bank  begged  for  it.  There  was  no  ques- 
tion of  solvency :  the  people  found  out  that  they  did  not 
want  a  financial  institution  of  national  scope. 

33 


SEPARATE  RESERVE  ASSOCIATIONS 


The  extraordinary  skill  of  Senator  Aldrich  in  balanc- 
ing against  each  other,  the  power  of  finance  and  the 
power  of  politics,  leads  one  to  ask  if  these  powers  will, 
necessarily,  remain  so  nicely  balanced.  Considering  the 
temper  of  the  present  Congress,  is  there  any  chance, 
whatever,  that  a  measure  with  the  Aldrich  stamp  upon 
it,  could  go  through  both  houses  without  amendment? 
How  often  do  any  bills  of  any  kind  become  law  without 
amendment?  And  what  is  more  natural  than  to  expect 
in  this  case,  an  upsetting  of  the  nicely  adjusted  balance 
of  powers?  I  should  think  it  quite  likely,  for  instance, 
that  as  Senator  Aldrich  puts  presidential  power  and 
influence  into  central  banking,  the  Congress  will  con- 
sider it  proper  to  favor  its  own  branch  of  government 
and  give  controlling  influence  to  the  Finance  Committee 
of  the  Senate  and  the  Banking  and  Currency  Committee 
of  the  House.  Every  bill  is  subject  to  amendment  in  its 
course  through  congress ;  but  a  bill  to  establish  separate 
reserve  associations  would  not  be  greatly  harmed  by 
amendment,  because  in  its  original  form  all  power  would 
be  left  in  the  hands  of  the  Government,  no  skillful  bal- 
ancing being  attempted.  And,  too,  even  if  a  satisfactory 
bill  should  be  passed  establishing  a  national  association, 
with  finance  and  politics  accurately  balanced,  we  should 
still  have  to  expect  that  in  actual  operation  the  balance 
would  be  upset  in  our  country  of  rapid  growth  and  mar- 
vellous changes.  Financiers  may  have  political  aspira- 
tions and  politicians  financial  hopes.  The  safe  course  is 
to  keep  the  Government's  power  wholly  unconnected 
with  and  wholly  above  the  power  of  finance.  In  this 
way  the  Government  retains  its  supervisory  and  cor- 

34 


SEPARATE  RESERVE  ASSOCIATIONS 


rective  control.  It  is  not  without  reason  that  the  Eng- 
lish Government  has  no  voice  in  the  management  of  the 
Bank  of  England,  and  that  the  positions  of  principal  and 
agent  are  carefully  preserved.  It  is  because,  in  banking, 
there  is  no  suitable  place  for  any  government  officers. 
This  is  the  verdict  of  two  centuries'  experience. 

To  attempt  to  push  the  Aldrich  Plan  through  this 
winter  is  to  run  the  risk  of  its  being  amended  far  out  of 
its  original  features,  because  Congress  already  is 
engaged  in  hunting  down  "Payne-Aldrich-tariff-in- 
iquities"  and  is  not  in  the  humor  to  look  favorably  upon 
Aldrich  currency  ideas.  On  the  other  hand,  to  postpone 
action  is,  in  my  judgment,  to  give  the  people  sufficient 
time  to  find  out  that  the  Plan  does  not  fit  the  American 
situation.  It  means  little  that  important  financial  and 
commercial  organizations  have  endorsed  the  Plan,  for,  in 
most  instances,  I  think,  endorsement  is  merely  the. 
acceptance  of  committees'  reports.  In  the  case  of  one  of 
our  most  influential  organizations,  the  members  attend- 
ing the  meeting  which  voted  the  endorsement,  voted 
down  a  motion  for  a  show  of  hands,  as  to  how  many  of 
the  persons  present  had  even  read  the  Aldrich  Plan  !  The 
supposition  that  the  Plan  might  possibly  have  been  read 
by  many  persons,  was  treated  as  a  joke  . 

Considering  the  shortness  of  the  time  that  any  plan 
for  financial  reform  has  been  so  placed  before  the  Amer- 
ican people,  as  to  lead  to  general  discussion  it  would 
seem  advisable  not  to  attempt  this  winter,  anything 
more  than  the  amending  of  the  National  Bank  Act,  leav- 
ing more  radical  action  until  after  the  presidential  elec- 
tion of  1912.  A  fair  start  toward  the  development  of 

35 


SEPARATE  RESERFE  ASSOCIATIONS 


open  discount  markets  for  Financial  and  commercial 
paper  could  be  made  by  giving  permission  to  banks  to 
place  their  acceptances  upon  time  bills,  not  only  upon 
bills  "arising  from  commercial  transactions"  for  this 
restriction  might  have  the  absurd  effect  of  preventing  a 
bank's  giving  its  acceptance  when  the  paper  is  most  per- 
fect!}' secured,  that  is  by  easily  marketable  collateral. 
The  proper  restriction  relates  solely  to  extent  of  risk,  in 
any  one  direction,  say,  for  instance,  to  10%  of  a  bank's 
capital  and  surplus  and  with  short  time  limitation.  A 
second  amendment  of  the  Act,  should  be  the  granting 
of  permission  to  banks  to  count  as  legal  reserve  clearing- 
house loan  certificates,  to  the  extent  of  one-half  of  the 
required  reserve.  No  money  has  ever  been  lost  by  the 
use  of  these  certificates ;  and,  the  security  back  of  them 
makes  it  impossible  to  see  how  any  money  ever  could  be 
lost  by  them.  The  effect  of  this  amendment,  applying 
it  to  banks  of  the  central  reserve  cities  would  be  to  re- 
lease in  time  of  stress,  over  $200,000,000,  a  sum  consid- 
erably larger  than  the  total  of  certificates  issued  in  these 
cities  in  1907.  Loan  certificates  come  out  only  in 
panicky  times  and  never  stay  out  very  long.  The 
knowledge  that  they  could  be  counted  as  reserve  would 
make  banks  more  generous  in  loaning  in  the  earliest 
critical  moments  and  thus  helping  to  ward  off  panic. 
These  changes  in  the  Bank  Act  would  give  the  country 
the  benefit  of  another  year's  study  of  our  unparalleled 
financial  problem  and  make  more  probable  the  chance 
of  a  true  solution.  It  might  appear  a  year  or  so  hence, 
that  the  Aldrich  machinery  is  unnecessarily  ponderous 
for  the  correction  of  a  panic,  and  far  too  ponderous  for 

36 


SEPARATE  RE SERF E  ASSOCIATIONS 

the  development  here  of  that  manipulative  financial 
skill  which,  in  Europe,  has  proved  to  be  capable  of  ward- 
ing off  panics.  I  should  think  too,  that  these  amend- 
ments to  the  Bank  Act  might  bring  about  important 
changes  in  the  monetary  problem  itself  and  greatly 
simplify  it.  It  would  be  very  advantageous  both  to  have 
a  simpler  problem  to  solve  and  to  know  better  how  to 
solve  it.  Financial  reform  concerns  everybody  from  the 
capitalists  and  merchants  who  want  safety  and  profit,  to 
the  laborers  who  want  steady  employment.  Congress 
should  take  a  preliminary  step,  at  once ;  and  then  should 
allow  time  to  be  taken  by  the  people,  to  more  fully  and 
more  generally  comprehend  the  whole  financial  ques- 
tion, the  advocates  of  any  plan  of  financial  reform  taking 
the  chance  of  its  survival,  as  the  best  in  the  interest  of 
the  commonwealth.  Unbusinesslike  nervousness  might 
weakly  excuse  but  nothing  could  justify  any  haste  to 
make  a  fifty-year  experiment  in  a  matter  of  transcendent 
importance  to  ninety  millions  of  people. 

New  York,  November,  1911. 


37 


EXTRACTS    FROM   REVIEWS 

OF 

MONEY,   SILVER   AND   FINANCE. 

A  BOOK  BY  THE  SAME  AUTHOR. 


(New  York  World.) 

His  claim  is  clearly  sustained  by  his  comprehensive  argument. 

(New  York  Herald.) 

Mr.  J.  Howard  Cowperthwait  has  put  into  small  space  and  plain 
language  the  conclusions  of  the  business  world  as  to  some  subjects 
which  politicians  and  charlatans  have  wrangled  over  for  the  last 
few  years. 

(New  York  Morning  Journal.) 

It  is  an  excellent  book  of  the  sort  that  a  man  of  ordinary  men- 
tality may  read  without  confusion,  yet  showing  a  thorough  under- 
standing of  economic  laws. 

(New  York  Times.) 

It  is  a  very  valuable  book.  We  know  of  none  which  is  so  well 
calculated  to  make  the  general  truths  of  finance  plain  to  business 
men,  or  their  detailed  but  constant  application  to  business  intel- 
ligible to  students  who  are  not  business  men.  .  .  .  The  author's 
facts  and  arguments  march  with  the  steady  regularity  and  force  of 
a  well-directed  military  column. 

(New  York  Tribune.) 

Mr.  Cowperthwait  has  the  tremendous  advantage  over  most  rea- 
spners  on  the  silver  question  that  he  knows  something  about  prac- 
tical business,  its  methods  and  necessities. 

(New  York  Observer.) 

It  is  a  common-sense  argument.  .  .  .  We  hope  it  will  be 
widely  read. 

(The  New  York  Daily  Stockholder.) 

It  possesses  the  elements  necessary  to  make  converts  to  sound- 
money  principles  of  those  who  are  undecided  in  their  views. 

(Wall  Street  Journal.) 

The  author  treats  a  wide  variety  of  topics  from  the  standpoint 
of  a  gold  advocate,  but  with  a  liberality  which  permits  him  to  quote 
freely  from  opposing  views. 

(Sunday  Democrat.) 

It  is  a  pity  that  he  is  not  in  Congress,  for  he  has  a  faculty  of 
making  the  most  abstruse  point  in  finance  clear  and  interesting. 
.  .  .  The  best  work  that  has  yet  appeared  on  the  subject. 

39 


(The  Examiner.) 

He  does  his  work  well.  As  a  business  man,  he  knows  and 
makes  clear  what  would  be  the  effect  of  free  coinage  of  silver;  and 
he  has  so  far  mastered  the  literature  of  finance  as  to  make  his  book 
profitable  reading  even  to  those  who  are  fairly  well  informed  on 
the  subject  already. 

'(Engineering  and  Mining  Journal.) 

His  style  is  very  engaging,  and  the  book  holds  the  interest  of 
the  reader  from  first  to  last.  The  chapters  on  the  balance  of  trade, 
foreign  exchange,  and  the  debtor  class,  are  especially  good. 

(Scientific  American.) 

Such  a  writer  has  evidently  the  courage  of  his  convictions,  and 
such  a  quality  is  a  commendation  of  his  book. 

(American  Banker.) 

Mr.  Cowperthwait  has  had  ample  opportunity,  coupled  with 
ability  and  application,  to  study  the  silver  question  and  ki,ndred 
financial  problems  which  have  so  puzzled  the  law-maker.  The 
book  in  question  is  a  carefully  condensed  treatise  which  throws 
much  light  into  the  dark  corners  of  the  finance  labyrinth. 

(Independent.) 

The  author  writes  as  a  business  man,  and  states  with  much 
force  and  sufficient  argument  the  case  against  the  free  coinage  of 
silver  by  our  Government. 

(The  Congregationalist.) 
We  heartily  agree  with  him,  and  commend  his  treatise. 

(Outing.) 

Whether  or  no  the  reader  is  convinced,  he  will  certainly  profit 
by  the  author's  labors. 

(University  Magazine.) 

His  chapter  treating  of  the  foreign  exchanges  shows  wide  and 
intelligent  acquaintance  with  fact.  The  book,  although  eminently 
opposed  to  the  "'free  silver"  movement,  is,  in  its  matter  and  argu- 
ment, of  such  intrinsic  value  as  to  be  well  worthy  the  careful  pe- 
rusal of  all  interested  in  the  subject. 

(New  York  Morning  Advertiser.) 

The  book  in  question  is  a  carefully  condensed  treatise  which 
throws  much  light  into  the  dark  corners  of  the  finance. labyrinth. 
Prices,  wages,  bi-metallism,  the  free  coinage  of  legal  tender  silver, 
international  exchange,  the  balance  of  trade,  the  volume-of-money 
theory,  and  a  dozen  allied  chapters,  are  handled  in  an  exhaustive 
manner.  Every  student  of  finance  should  have  the  book  upon  his 
desk. 

(New  York  Evening  Telegram.) 

The  opinion  fully  expressed  of  a  business  man  upon  a  question 
which  politicians  are  ignorantly  playing  with. 

(New  York  Press.) 

A  thoughtful  and  comprehensive  survey  of  the  present  financial 
condition  of  the  United  States.  ...  A  timely  and  helpful  con- 
tribution to  the  economic  literature  of  the  day. 

40 


(New  York  Commercial  Advertiser.) 

Mr.  Cowperthwait's  treatise  is  clearly  written  and  his  argument 
well  put. 

(New  York  Journal  of  Commerce.) 

The  book  contains  an  interesting  history  and  discussion,  ac- 
companied by  tables,  of  the  movement  of  prices,  the  relation  of 
prices  to  wages,  the  balance  of  trade  and  foreign  exchange,  the 
"volume  of  money  theory,"  and  allied  subjects. 

(Brooklyn  Eagle.) 

It  is  evidently  the  result  of  wide  reading,  much  reflection,  and 
accurate  observation,  supplemented  by  practical  business  experi- 
ence. ...  It  deserves  the  respectful  consideration  of  all  business 
men. 

(Brooklyn  Standard-Union.) 

Col.  Cowperthwait's  book  will  do  much  valuable  service  in  the 
cause  of  honesty  and  honest  money,  and  is  most  timely.  It  is  con- 
cise, with  the  directness  and  precision  of  a  business  man. 

(Brooklyn  Citizen.) 

It  certainly  covers  the  ground  in  a  comprehensive  way. 

(Brooklyn  Life.) 

Col.  Cowperthwait's  illustrations  are  excellent.  .  .  .  He  suc- 
ceeds admirably;  the  argument  is  clear  and  logical,  brief,  and  to 
the  point. 

(Norwich  Bulletin.) 

The  subject  is  so  plainly  and  comprehensively  handled  that  any 
man  of  ordinary  intelligence  can  grasp  it. 

(Bedford,  Mass.,  Standard.) 

It  is  a  common  sense  book,  and  will  be  widely  read. 

(Yale  Courant.) 

The  lucidity  of  the  argument  and  the  broad  treatment  of  the 
question  by  the  author,  make  the  work  worthy  of  perusal  and  of 
careful  thought  by  those  who  have  no  well-defined  idea  of  why  they 
are  opposed  to  silver  legislation. 

(New  Haven  Palladium.) 

The  book  contains  a  great  deal  of  valuable  information  on  the 
subject. 

(Providence  Journal.) 

With  remarkable  compactness,  clearness  and  precision  of  style, 
he  manages,  within  230  pages  of  large  print,  to  make  the  general 
truths  of  the  principles  of  currency  perfectly  plain  to  the  average 
degree  of  intelligence,  and  to  say  about  all  that  need  be  said  on  the 
silver  question  from  the  purely  national  point  of  view. 

(Springfield,  Mass.,  Journal.) 

The  chapters  on  the  balance  of  trade  and  foreign  exchange  are 
of  special  interest. 

(Worcester,  Mass.,  Gazette.) 

A  clear  and  intelligent  explanation  of  many  of  the  points  which 
the  country  is  now  discussing. 

41 


(Boston  Journal.) 

No  better  presentation  of  the  present  condition  of  the  silver 
question  has  yet  been  published;  ...  an  argument  that  is  in- 
structive, intelligent,  and  so  cleverly  stated  that  those  best  informed 
in  the  subtleties  of  finance  can  follow  it  with  continued  interest. 

(Evening  Journal.) 

Mr.  Cowperthwait's  book  ought  to  prove  materially  useful  in 
the  present  campaign  of  education  upon  this  important  subject. 

(Boston  Advertiser.) 

The  author's  style  is  simple  and  direct.  .  .  .  The  first  charac- 
teristic of  Mr.  Cowperthwait's  book,  however,  is  readable- 
ness.  .  .  .  The  highest  praise  that  can  be  accorded  this  book 
is  that  it  is  thoroughly  sound,  and  that  there  is  not  an  uninterest- 
ing word  in  it. 

(Boston  Globe.) 

In  the  volume  is  given  the  detail  of  what  might  be  termed  a  run- 
ning fight  with  Senator  Stewart  and  others  on  the  money  question, 
and  the  reader,  of  whatever  opinion,  can  praise  the  author  for  the 
fairness  with  which  he  states  his  opponents'  case,  or  allows  them  to 
state  it,  which  is  better  still. 

(Portland,  Me.,  Transcript.) 

Mr.  Cowperthwait's  business  experience  enables  him  to  throw 
much  light  on  the  subject  of  wages,  prices,  bi-metallism,  inter- 
national exchange,  balance  of  trade,  and  many  other  allied  topics. 

(Portland,  Me.,  Argus.) 

The  style  is  clear,  transparent,  remarkably  free  from  techni- 
calities, and  in  general  gives  token  that  the  writer  is  both  a  thought- 
ful and  studious  investigator,  and  a  rhetorician  of  no  mean  abilities. 

(Lewiston,  Me.,  Journal.) 

He  presents  his  arguments  in  a  clear  and  logical  manner.  The 
work  is  evidently  the  result  of  much  reading  and  observation,  and 
is  not  devoted  to  theories,  but  to  practical  ideas. 

(Philadelphia  Item.) 

When  people  speak  about  money,  the  listeners  know  what  that 
word  means,  and  when  people  read  Mr.  Cowperthwait's  book  they 
will,1  no  doubt,  have  a  greater  insight  into  the  finances  of  this 
great  country  than  ever  before.  .  .  .  The  book  is  a  compre- 
hensive one,  and  probably  the  best  work  of  its  kind  yet  pub- 
lished. There  have  been  plenty  of  essays  bearing  upon  the  sub- 
ject of  money,  but  none,  the  reviewer  believes,  covers  the  ground 
so  thoroughly  as  does  Mr.  Cowperthwait's. 

(Philadelphia  Record.) 

Lucidity,  cogency,  and  logic  mark  every  line  which  he  has 
written,  and  there  is  not  one  page  that  is  not  bright  with  ex- 
ample and  illustration,  presented,  too,  in  such  a  simple  and  con- 
vincing way  that  the  veriest  tyro  in  political  economy  can  follow 
his  reasoning  and  comprehend  his  conclusions. 

(Philadelphia  Bulletin.) 

The  author  is  a  practical  business  man,  and  he  makes  a  very 
strong  argument  against  free  coinage,  based  on  an  education  in 
business. 

42 


(Philadelphia   Stockholder.) 

We  think  every  business  man  interested  in  the  questions  of  the 
day,  and  particularly  in  that  burning  one,  the  silver  question,  will 
be  amply  repaid  for  the  time  expended  in  reading  "Money,  Silver, 
and  Finance."  Mr.  Cowperthwait  is  himself,  a  business  man,  and 
he  takes  the  direct  method  of  a  business  man  in  going  straight 
to  the  heart  of  his  subject,  which  he  treats  in  a  masterly  way. 

(Philadelphia  Press.) 

The  author's  discussion  is  exhaustive.  He  writes  for  the  aver- 
age reader,  and  writes  very  clearly,  in  particular  of  India  and  her 
silver  rupee,  of  prices  and  wages,  and  foreign  exchange. 

(Philadelphia  Public  Ledger.) 

Cool  in  his  reasoning,  staid  in  speech,  the  writer  produces 
a  most  favorable  impression  by  his  judicious  and  well-consid- 
ered essay. 

(Pittsburgh  Chronicle-Telegraph.) 

The  author  is  especially  clear  in  stating  the  reason  why  China 
and  India,  which  had  been  for  centuries  absorbing  all  the  silver 
of  the  world,  have  stopped  doing  so  now. 

(Baltimore  Sun.) 

It  is  a  very  able  presentation  of  this  side  of  the  problem. 
(Baltimore  American.) 

Every  line  bears  testimony  to  the  careful  deliberation  with 
which  the  author  has  proceeded  to  collect  his  material,  and  evi- 
dences the  fact  that  he  knows  whereof  he  writes. 

(Washington  Post.) 

It  is  one  of  the  ablest  contributions  to  that  side  of  the 
question  which  has  ever  appeared. 

(Richmond,  Va.,  Times.) 

A  strong  argument  against  the  free  coinage  of  silver,  written 
by  a  business  man. 

(Buffalo  Express.) 

Mr.  Cowperthwait's  arguments  are  short  and  to  the  point, 
answering  the  free-coinage  fallacies  one  after  another.  There  is 
not  an  uninteresting  page  in  the  book. 

(Mercantile  Review.) 

The  chapters  devoted  to  a  description  of  the  action  of  foreign 
exchange  are  as  good  as  any  we  have  seen,  and  in  several  im- 
portant particulars  clearly  put  and  quite  new  to  the  average 
student  of  money  matters. 

(Buffalo  Times.) 

He  makes  a  very  strong  argument  against  free  coinage,  based 
on  an  education  in  business. 

(Cincinnati   Gazette.) 

The  style  is  plain  English.  Students  of  these  live  questions 
will  find  valuable  help  in  this  work,  especially  as  a  compendium 
of  the  history  of  silver  legislation  and  silver  money  in  this  country. 
(Ohio  State  Journal.) 

He  clearly  and  satisfactorily  exposes  the  silver  fallacy  in  the 
light  of  both  principle  and  experience. 

43 


(Indianapolis  Journal.)  » 

The  author's  views  are  intellig£nt,  conservative,  and  well  ex- 
pressed, being  on  the  side  of  sound  finance  and  honest  money. 

(Lafayette,  Ind.,  Leader.) 

His  keen,  sarcastic  criticism  of  his  opponents'  beliefs  must  be 
appreciated  even  by  men  voting  in  direct  opposition  to  his  views. 

(Peoria,   111.,   Transcript.) 

He  has  considered  his  subject  from  a  business  man's  stand- 
point, and  in  such  a  way  that  he  may  readily  be  followed  by  those 
who  have  not  previously  made  a  study  of  the  subject. 

(Chicago  Herald.) 

This  is  an  excellent  and  timely  discussion  of  the  silver 
question. 

(Chicago  Times.) 

The  most  compact,  lucid,  and  convincing  exposition  of  the 
nature  and  workings  of  foreign  exchange  ever  offered  to  the  pub- 
lic; .  .  .  furnishes  another  and  very  clever  analysis  of  the  vol- 
ume-of-money  theory. 

(Chicago  Tribune.) 

Mr.  Cowperthwait's  book  will  do  more  than  the  temporary 
service  of  enlightening  the  public  in  regard  to  its  duties  respecting 
the  free-silver  fight  of  the  present  Congress.  It  can  impart  in- 
formation which  is  very  much  needed. 


44 


240983 
.£&£ 

-Or 


